Richie Candy Corp, issued 20-year, $10,000,000 face value, 9 % convertible debentures on Jan. 1, 2017. The bonds have a par value of $1,000, with interest payable semiannually. The initial conversion ratio is 10:1, and in 3 years it will increase to 12:1. At the date of issue, the bonds were sold at 105. Bone premium is amortized on a straight-line basis. Richie candy's effective tax was 40%. Net income in 2017 was $26,860,000, and the company had 12,800,000 comomn shares issued and outstanding during the entire year.

Instructions:

a. prepare a schedule to compute both basic and diluted earnings per share.

b. discuss how the schedule would differ if the security was convertible preferred stock.